The US fiscal mess: Some unpleasant fiscal simulations
cepr.org
cepr.org
As a consequence, the Fed will be forced to lower interest rates as low as possible again so the government can escape crushing interest payments and let inflation inflate away government debt.
Expect long term inflation, asset prices, and commodity prices that keeps rising as a consequence.
We definitely don’t know the future trajectory of productivity growth. There might be inflection points that more than compensate for slowing worker growth. This is in fact the basis for investor excitement about clean energy, robotics, artificial intelligence, new health care technologies, etc.
We, the population, vote for the persons with specific political wills. We choose what to enact.
Sort of. I think it's more accurate to say that there are just enough fiscally irresponsible politicians in office to prevent a government that pays as it goes via taxes. The vast majority of those politicians are Republican, taught by Ronald Reagan that they could have massive spending AND tax cuts without political penalty (indeed, Reagan was rewarded with adulation for nearly tripling the national debt). Democrats have been fairly consistent in reducing the deficit, and if they'd had their political druthers, would've reduced it even further with additional taxes. The reality is that maintaining a modern superpower of over 300 million people requires much more in annual taxes than voters realize, at least in part because they've been misled by Republican leadership to believe that taxes (particularly progressive taxes) are unnecessary.
Universally in this world people live most ecologically in parts of the world where they are too poor to act otherwise, not where they are most climate or environment conscious. Voluntary personal responsibility gets you nowhere when it comes to solving large-scale problems.
That sounds great and all until your granny can’t afford heat in the winter or there’s no food in the stores, etc. Then people will vote out the politicians making the policies or revolt.
That’s what I’m talking about personal responsibility. Not regarding individual actions per se, but accepting that most of us in the developed world are as complicit as the big oil companies.
That said, technology is improving to where the cheapest option is the ecological one for power. A fair bit of that has been due to individual actions of many folks wanting and paying for solar power and electric vehicles, etc.
Ironically to me, the individual preferences of the Green Party members also put lots of political pressure to shutdown nuclear power in Germany. That caused Germany to fallback to coal and natural gas.
Good luck clawing back the 10% of SNAP benefits spent on soda.
We literally have no choice but to make small insignificant changes that does not harm the bottom line of those responsible too much.
Yes everyone should be ethical in their consumption. If I gave you an arbitrary product and asked you to tell me if its ethically sourced, there's a high chance you can't. Even if I give you the internet and a week to research.
So, that's one problem. Another problem is that even if you could tell what is/isn't ethical you can't necessarily switch away.
Sometimes the more ethical choices aren't available, or are too expensive, or are outlandish. I'm sure everyone in the US would love to eat grass fed pasture raised beef. Meredith, who works two shifts at the town Dairy Queen, who's trying to give her son some protein, so his tiny muscles don't atrophy, doesn't have the funds for that.
Cars and oil are perhaps the most clear-cut example of this. People don't drive because they want to, they do it because they have to. It's literally life or death. A car in the US isn't just a box on wheels, it's a lifeline.
When something is permitted, it becomes mandatory to somebody, and oil is used widely. Personally choosing to avoid products that used oil in their manufacturing would basically relegate you to having to farm your own food by hand. That is not feasible in a society with competition.
Hundreds of millions will die due to climate change if we don't act.
The problem I think, is that oil would still be mandatory because of competition between countries. Especially if there were wars.
Except that this is far from the reality.
We elect people with specific views but they seem to vote regardless of their constituent interests, let alone their supporters’. Instances of this fact are very easily searchable online.
https://act.represent.us/sign/problempoll-fba
You want me to believe that the majority of constituents represented by these 193 republican representatives are against an insulin price cap?
https://images.dailykos.com/images/1054844/story_image/FPNbI...
My newest advocacy addresses this problem.
I call it “extend the powers of justice by jury”.
The idea that these representatives can just vote without accountability is absurd, and clearly a weakness money has uncovered in the US political system. (I refuse the claim status quotitians make that “elections are accountability“)
My suggestion is elected representatives act as litigators to their side of the argument and they need to make their claim to a jury overseen by a judge. That jury determines if a bill passes.
Who you elect as your representatives still matters, but now their ability to litigate persuasively is the number one quality of consideration when choosing those representatives.
This should remove the power that money has in bills being passed, as well as completely remove the “rider compromises” where officials compromise by including unrelated clauses to encourage the passing of a bill.
I want a representative government and I think expanding the powers of justice by jury will help in further enshrining that goal in our political systems.
There's no direct election, and despite "every kind" of politician existing, the representatives of two parties with very similar polices overall, differing only in pointless stuff, keep taking turns in the presidency since forever. The choices are quite constrained.
your argument stopped having any semblance of merit at least decade ago. Now it is laughably unbelievable.
Now, ought there be more direct representation? Of course!
Should we have more than two major parties? Of course!
Guess what, a lot of people on this forum I am sure make plenty of money to be able to afford going to a few fundraising events for local politicians that they favor.
Y'all have influence here if you want to use it.
This is prohibitively expensive for anyone, even the largest corporations.
You can help get people elected into local positions that align with your interests. AND some of those people will continue to build their career in politics and may become Senator or Governor someday.
That's influence. That's buying into the system to make it how you think things will be better.
Such is life in Palo Alto.
It appears that Palo Alto has elections for city council every 4 years.
Here's an election guide:
https://www.cityofpaloalto.org/Departments/City-Clerk/Munici...
https://www.cityofpaloalto.org/Departments/City-Clerk/Munici...
The US would piss off other countries who lent us money, who'd come knocking with a country-scale baseball bat demanding their money. But two thirds of that $35T is owed to Americans. There'd be a good chance of either a civil war or global war. We'd likely lose our status as the world's reserve currency, devaluing the dollar and leading to inflation.
Nobody would trust the government enough to lend them money, so they'd have no choice but to print money to pay expenses at this point. So, we'd have inflation either way.
Because one ultimately still keeps the debt obligation in place, whilst the latter causes debt confidence collapses & the destruction of faith in repayments from the government.
Would you rather take a 2% value loss via inflation, or a 90-100% value loss as the government declares default? Most people would take the former rather than the latter, as the impact of one is much softer than the other.
Defaulting would impact the value of Treasurys far more than inflation, a bond’s price is merely the sum of its future cash flows, pricing in a default would push yields waaay higher than they would from inflation alone. There would also be massive liquidity problems since banks and companies hold a ton of Treasurys along with pensions and retirees.
There’s far more negative impacts from a debt default that sibling comments already elaborated on.
There are very few black swan scenarios that would cause me to liquidate the assets in my retirement accounts for cash, but a US sovereign default would be one of them.
A huge amount of debt is to Americans, American institutions and the states.
They wouldn't get voted in. You said it yourself. What kind of platform is "let me cut your benefits/raise your taxes for temporary pain now so that hopefully in 10 years some good thing (that you might not even notice) will happen if everything goes according to plan"?
Did we read the same article?
Disagree on multiple counts.
First - you don't need both - if you cut Social Security and Medicaid altogether, and use the surplus to start paying down debt, that solves 100% of the deficit and starts chipping away at the debt, while this would actually reduce taxes rather than raising them. I'm not asserting that the political will exists to do this (it doesn't), but the idea that you can't balance the budget without raising taxes is obviously false - taxes are nonzero, but you could reduce spending to zero.
Second - you don't actually need either - if you hyperinflate the currency, the value of the existing debt becomes negligible. To wit, I fundamentally agree with the message of the remainder of your post.
How is making me and almost everyone over 60 homeless going to result in a surplus? There would be all the dead lawmakers to bury, and so much security to try to protect the rest.
That's a "let them eat cake" level of breaking the social contract you're considering
I'm sympathetic to your struggles if OASI is the difference between you being homeless and not 60+ years into your life. Just know that your benefits are slated to be reduced by a minimum of 21%, automatically starting in 2033 when the trust fund is depleted, per laws already on the books.
Social Security and Medicare are, fundamentally, classic pyramid schemes. They rely on an infinitely increasing number of people to remain fiscally viable. We're at the end of that road now though, U.S. TFR is down ~1.6. These programs are going to crack soon, and anyone under the age of 40 today will never see a penny from either of these programs despite paying in for their entire lives.
I understand that ripping away benefits you already paid for is unfair to your generation, but being forced to fund benefits we'll never receive is also unfair to my generation, to say nothing of all the generations after mine.
Considering your argument is based on your belief 21% equals 100%, I should hope so!
The problem isn't the deficit - it's the spending. When the government spends money, it takes people away from whatever other economic activity that person would be doing, and consumes their labor in service of the government instead. This reduces economic productivity, and we all end up with less stuff as a result.
The key is to focus on productivity in terms of stuff (not money) - everything else takes care of itself.
This is important because focusing on money and the deficit often inspire solutions that attempt to solve those problems, but at the cost of hurting productivity. Higher taxes, for example. Raising taxes may (arguably) raise revenue and reduce the deficit - but may well also reduce productivity. That would be bad.
The alternative to working for government making a useful website that would be productively used by millions of their fellow citizens is working for yet another "startup" making Yet Another Pointless Social Media or AI scam with no revenue model beyond getting acquired by a bigger company.
The problem here, in my opinion, is that the US does not make enough stuff. We have a lot, and I mean a lot, of "fake" jobs. Jobs that move things, not produce things.
All the actual stuff we consume is made overseas. We've essentially given up our economy in exchange for making middle men of middle men of middle men. Our economy, I feel, is largely theoretical.
If we look historically at times of economic boon, there's a common thread. Huge increases in manufacturing and production of goods. The 50s weren't prosperous because of taxes, they were prosperous because of WWII. And, if you look, most of this increase stems from the government. Whether it be war or triple letter agencies making stuff.
It also takes as an unstated given that we need or want to stabilize deficit/GDP or debt/GDP ratios.
The US dollar is still a global reserve currency. The US situation might therefore be "special" or "privileged" compared to other countries that have non-reserve "local" currencies.
The other question I have, is "does debt/GDP & deficit/GDP matter in absolute terms, or only in relative terms?". One could imagine a world where most governments have similar debt problems, and their currencies have similar inflation problems. For someone holding currency, there would be little reason to pick another currency in this scenario. One would instead predict a rush to place money in assets, causing asset inflation. That sounds like our present calamity, perhaps from different or more varied causes.
The choice to pay interest on what is in fact a balancing item in the accounts is a political choice. Just don't do that and then those ratios are irrelevant.
We have a floating rate exchange system. Quite why people think ratios from a fixed exchange rate era remain relevant is difficult to understand.
Other than that is what they really want to go back to - one world currency with no variation and governments completely unable to direct resources for the benefit of their own people, rather than global capital.
The world has excess production. Where is the untapped source of demand that will replace the current net import nations? There isn't any. That's why those with excess production swap that excess production for promises, rather than physical output.
That's the thing. Mercantilism never really went away. It is just more subtle nowadays.
The greek crisis can be boiled down to this: "Germany is exporting to Greece, because the absence of exchange rates makes German products unreasonably cheap in comparison to Greek products. Greece therefore buys from Germany, but Germany doesn't buy from Greece."
Despite EU bonds not existing the EU unified bond yields, and the had a greek government that did take full advantage of this.
There was a reason the EU had rules, and then those rules were ignored in favor of an idiological political project.
As it stands the ECB refuses to do the necessary reflection of the German Target2 hoard into the Greek economy and the result is excessive unemployment and reduced production in Greece due to lack of monetary circulation.
All to service a belief about the medium of exchange that isn’t actually the case - that people won’t hold it without monetary incentive (aka an interest payment).
We need to chuck out this damaging interest-obsessed monetary religion. The price anchor and stabilisation policy needs to be in the market for labour, not the market for money.
So this was the case before Greece joined the Euro?
You left off the prior in your rush to attack the conclusion, but no, if you separate the necessary condition then the event will no longer occur.
Can’t do a reset on a currency that isn’t yours.
That happens automatically when government makes a payment
Do you think Greece never had any national debt before joining the EU? They’ve had multiple defaults, and then built up more debt, etc. long before joining.
[https://www.toptal.com/finance/financial-consultants/greek-d...]
Same with Argentina, Brazil, etc.
Someone is always willing to lend money, just rarely at the rate the country is willing to pay.
It’s a category mistake to conflate the two
Bonus if you can compare lending to Russia too.
It’s only when the currency in question is somebody else’s currency that what most people understand as lending and borrowing actually happens.
With a country’s own currency it’s more refinancing to a higher interest rate to provide a basic income to those who already have money - all based upon the belief that there is a magical unobservable interest rate that will balance the system. If only we could find it.
A state operating its own currency is self financing. [0]
Russia is like China. They are technically lending to us, and it doesn’t matter. Nor does it matter to them if we delete that debt as they use the rouble [1]
[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4890683
[1] https://new-wayland.com/blog/why-the-russian-oil-price-cap-w...
They could inflate or deflate that half they had when they needed to do other things. It wouldn’t always work well, but it existed.
With debt denominated in Euros AND a local economy operating on Euros, they control zero halves.
So defaulting now screws them out of their grocery money too, and not just out of their lambo money like it did before.
The same (pre-Euro) situation is true of all the other examples, including Russia.
It’s not that you need to do anything about it at all, but eventually your economy will completely collapse.
The vast majority of money systems were designed to be disposable and to only last a few hundred years though.
If you want to use the “printing money” analogy because you can’t grok the correct credit and debit process then you have to accept that taxation “shreds money” and saving money (which is what a deficit is) “puts it in a drawer”.
How does people putting money in a drawer cause a problem?
This is the one that is mind blowing. The military is fucking gigantically huge. And every single years a militray budget worth of stuff simple gets burned for 'nothing'.
The problem in the US is that most of the money is already commited. The future money is already promissed. And the rest is mostly military and debt service. And what is left over isnt enough to cut to be effective.
I really dont see a solution.
I'm happy that in my country we have strict limits in place and debt/gpd is only 40%. Not have the huge debt servicing ever year seems usuful to stabilze your budget long term.
Also, the US budget was balanced in 2000. It is possible.
I have no idea why so many people refuse to accept that there is a growing problem.
It was balanced due to the Internet bubble providing unsustainable revenues coupled with age demographics. The large cohort of the population had hit peak earnings years. The govt revenue as a % of GDP hit all time highs, not because of careful planning and choices, but because of luck and unsustainable timing.
When that bubble popped, and as the cohort in peak earning years shrunk as people aged out of it, so did the revenue, and then the budget became un-balanced again. Certainly the unpaid for Bush Tax cuts have made it worse, but the fall began before Bush even took office, and certainly was well gone by the time Bush passed the tax cuts.
It was not balanced by some stroke of government genius.
As they paid less everyone else could just be paying more as a total
“Contrary to common perceptions, the CBO data indicate that: (1) income earned after taxes and transfers has increased over the past several decades for all income groups, (2) the federal tax system is progressive and has become more progressive over the past three decades, and (3) the federal system relies heavily on higher earners to raise revenue for government services and means-tested transfers.”
https://www.forbes.com/sites/timworstall/2015/01/08/the-us-t...
I can’t find data before 1980.
Not saying I entirely disagree with it. I just don't think that data is that compelling since it's a pretty shallow analysis of taxation and income of high earners (which is fine, not every article needs to be that deep)
Reagan’s tax reform wasn’t a gimmick: it broadened the tax base (to encompass more kinds of income) and lowered rate to keep the effective tax rate basically the same.
The biggest problem is we simply doesn’t tax enough. We want to grow the scope of our government to be more like Europe, but we aren’t willing to tax the middle and upper middle class the way they do in Europe. We had an au pair from Germany. Our effective tax rate in a blue state as a dual income professional couple was the same as she paid at her entry level office job.
You're right that the 86 reform was pretty progressive but with all 3, the rich did great, poor did alright and middle class did poorly, IMO.
What was their effective rate in those years? What percentage of their income are they paying compared to the nonrich, and how did it trend?
Whether you think that's a good thing or a bad thing, it's hard to call it progressive.
Gross federal tax revenue never declined, even in the year after the 2017 tax cuts took effect.
https://www.statista.com/statistics/200405/receipts-of-the-u...
This time span covers top marginal tax rates from as high as 90% to as low as 35%. The truth here is that we cannot significantly increase tax revenues by raising tax rates, as when taxes get too high, people are simply incentivized to earn less, or to spend more on finding, developing, or exploiting loopholes in the tax code to reduce their taxes. Accordingly, actual economists have understood for the last 50 years that simply raising taxes blindly can counterintuitively decrease overall tax revenue. This effect is part of what's referred to as the Laffer Curve. [2]
But to your first point, that there is no problem, I'd like to point out that interest spending has exceeded defense spending. [3]
But hey, don't take my word for that constituting a problem, take it from Jerome Powell, chair of the U.S. Federal Reserve:
"The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial." [4]
In summary:
• No, everything is not perfectly fine. The United States is on a fiscally unsustainable path.
• No, the TCJA is not the big proximal contributor to the problem, routine deficit spending resulting in unsustainable debt is.
• No, we can't easily fix the problem by raising taxes on everyone, let alone by only raising them on the rich.
Citations:
[1] https://fred.stlouisfed.org/series/FYFRGDA188S
[2] https://www.investopedia.com/terms/l/laffercurve.asp
[3a] https://fred.stlouisfed.org/series/A091RC1Q027SBEA
[3b] https://fred.stlouisfed.org/series/FDEFX
[4] https://thehill.com/homenews/4447860-powell-the-us-is-on-an-...
None of this stuff is a priori true.
If this is incorrect, please feel free to correct me.
Also, what is your takeaway from this, after discounting the validity of the Laffer Curve, that the US as a whole ought to simply enact dramatic tax hikes, which will solve fiscal stability issues?
That's before we get into the (lack of?) empirical data. I'm finding it hard to come up with any citations that offer an existence proof of a Laffer curve for real, actual public finance systems. The Cato Institute and Brookings have things to say, but they're encumbered by policy goals. Ebrill, also encumbered by policy goals near as I can tell, urges caution. Espanhol's master's thesis concludes that a Laffer curve doesn't exist in its investigation of corporate tax rates across the Eurozone.
So, frankly, I'm keener just to throw out the academics here.
That's also before we get into what debt is and how it works. It isn't a call option: the persons, fictitious and natural, to whom the US government is indebted cannot exercise those debts on a whim in an effort to get paid. They have a maturity schedule. What matters to these creditors (and all creditors more broadly) is that there's faith that their debt instruments will eventually fully mature. For natural persons, that's likely decades from now. For fictitious persons like governments, that could very well be on the order of centuries.
It's for this reason why I also reject the appeal to Jerome Powell's authority: he doesn't express a concrete reason why he expects the faith that those persons, fictious and natural, have in the federal government to erode to the point where default is some notion of imminent. Does he expect the executive branch to stop payments suddenly? Does he expect that the tax base will collapse in the very near future? (Malthusians in particular are fond of crying the latter, predicting widespread famine.)
Furthermore, that's all before we get into taxation and how it works. It's a sticky subject academically, even after you peel away the conflicting policy goals. Is taxation revenue? Is it a constraint on the money supply? Is it economic dead weight? The answer to all of these is, "It really depends." One model says one thing, and another says something else, and there isn't a whole lot of real consensus on which one fits best where. (Economics, it turns out, is one of those social sciences, which means that most experimentation is thorny unless you abandon ethics. When all you have is models...)
The thing that matters at the end of the day is that someone (maybe you!) will cheerfully accept my greenbacks for what I reasonably feel like they're worth, and as long as that remains the case, I'll happily render unto Caesar until we finally find a way to kill him for good.
The scam part comes from how the tax cut was marketed to Americans
I think because this implies change. And over the past couple decades it's become more and more acceptable to simply be against all change. It's political viable to be the guy who doesn't change things, and you can slam other people just by saying "look, he changes things!"
I mean, lately it feels like there's a lot of political will to take a "do nothing and hope it works" approach to everything. It's frustrating.
A mountain of unrealized goodwill. It's such a pity, because indeed much of infrastructure is barely maintained.
Doom is about the future, not the present. Why are you looking at present levels instead of where the trend is taking us in the future?
That's one problem with looking at charts that aren't indexed/real (inflation adjusted) and/or ratios.
On it's face, our debt looks scary.
https://fred.stlouisfed.org/series/GFDEBTN
Looking at it as a ratio, it's still not great, but we've been in similar places in the past.
Debt as a percentage of GDP.
https://fred.stlouisfed.org/series/GFDGDPA188S
Interest as a percentage of GDP.
In 1946 there was a lot of pent-up demand for housing and consumer durables and a young fast-growing population. Now, not so much.
It's also a stretch to call 1990 a similar place for similar reasons.
We really are in a never-before-seen place with our current population age structure (old age dependency ratio) and fertility rates.
Population growth has slowed, but there's a good chance it would increase if affordable housing was available.
We are in a unique place now, and I think we were in 1946 too. I'm not saying everything will be fine, but I don't think it benefits us to say that this is uncharted territory either.
It appears there is no further reasonable headroom for debt should a third world war break out -- the Americans will be up "shit creek without a paddle". In that scenario, roaring inflation would destroy whatever is left of the current economy as globalist trade routes collapse.
The recent wars and posturings of Western rivals (Iran, China, Russia) are no surprise. They are sharks circling what they perceive as a failing economic system in a winner-takes-all game.
I wouldn't characterize what Iran, North Korea, and Russia is doing as sharks circling a failed US economic system.
Russia making a play for control of Ukraine and control of FF/agricultural production/exports, is more about their economic reliance on on FF exports/etc and the West moving towards renewables. The fact that they're willing to throw away so much of their military and population on it shows how much of a threat they think it is.
It could also be because of a perceived threat from NATO, but if that was the case they would have backed off when other countries started taking about joining NATO. Instead they doubled down and NATO is more powerful than it was before.
Iran and North Korea and using their resources to support Russia in exchange for technology/etc.
China is making moves to strengthen their economy during all of this, but I think they're acting as opportunistic towards Russia as they are towards the West.
That's why they're being really heavy handed in negotiations with Russia. They know there isn't anywhere else for Russia to sell a lot of it's gas, and they see this as an opportunity to gain an advantage over Russia.
https://www.reuters.com/business/energy/russia-china-gas-pip...
I don’t think there’s a scenario where you can look at any country with this much debt, break the news, and then have it not sound like gloom and doom.
This just reminds me of the Mel Brooks Robin Hood Movie: “Maybe, if you break the bad news to me, but in a good way, then it won’t sound so bad!”
https://m.youtube.com/watch?v=Mi-YLIwkfJs
“That will probably happen here.”
Can you even conceive of how much inflation this would require, especially at the pace of the debt’s growth? People would be rioting.
I mean not ideal but the 50s and 60s were quite good in the UK.
The US would not have any of those advantages. There's not a more stable dollar alternative to look to, there's not an obvious ludicrous economic boom on the horizon, the export market's probably not growing that much, and US taxes don't have much headway to go up before being counterproductive and stalling growth (if they haven't already been doing so). Stalled growth results in less tax revenue, defeating the point of the tax increase.
In a nutshell, the UK was partially saved by the US and countries rebuilding themselves. The US has no savior.
The CEPR is an EU think tank supported by the French Government [0]
France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2]
Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc.
[0] - https://cepr.org/about
[1] - https://www.politico.eu/article/macron-heads-to-washington-o...
[2] - https://www.institutmontaigne.org/en/expressions/real-reason...
It's absolutely a biased piece of advice because it has subsidized American industrial players at the expense of players across Europe - which is why the EU has been in the process of lobbying against American deficit spending that is primarily being used for subsidizing industrial policy.
Western European austerity has clearly hobbled France and Germany while the US was able to weather the GFC and COVID recsssion by using it's deficit.
> And France isnt in a position anyway to do that, since they have the exact same problem as the US.
Yet they are as Macron's lobbying blitz in 2022-23, the French Govt's Institue Montagaine has pointed out, and the French govt supported CEAP has been lobbying against.
If you want argue that deficit spending is fine and no problem, then just do that. You don't have to sell us on how CEPR is an evil arm of French propaganda.
Of course another level of nuance to that conversation is then asking "and what could happen to break that cycle and what would result"?
This is referring to current debt, not the idea of ending the debt cycle. The US doesn't have the option of letting current debt just sit for an arbitrary amount of time and get reduced by inflation, but has to pay according to the obligations of the outstanding debt securities. It also doesn't buy back the debt securities before they are due. The real value will be reduced due to inflation until the point where obligations are due, but there isn't a choice to arbitrarily let it sit.
By average 2-3% a year inflation or by above-average heightened inflation (which hurts people)?
Additionally, the intergenerational transfer of wealth from Boomers to Millennials and Zoomers will occur over the next 20ish years as Boomers die off. This wealth transfer could be used to increase tax revenues.
One tax that could be raised would be the estate tax, which would be unpopular among the wealthy, but if lowered to 1MM-1.5MM (maybe 10% rate) and over 50MM (50% rate) would help to fill the deficit. The more likely scnario is the government allows higher inflation rates and we have a bag of cheetos costing $10 in <10 years.
The SS trust fund is projected to be depleted by 2033, at which point benefits will be automatically reduced to just 79% of their current level, by laws that are already on the books. This information is freely available from the Social Security Administration themselves. [1]
Keep in mind, Social Security's and Medicare's unfunded future liabilities grossly exceed the current liabilities of these programs.
These defined benefit programs are mathematically reliant on a growing, rather than shrinking population, yet a shrinking population is what the entire industrialized world is currently on track for with our sub-2.1 TFRs.
I'm not stating your assertion is false, but I don't see the connection.
If they weren’t there, or this was 100 years earlier, or Gen Z was fundamentally different than they had been raised to be, then yeah TikTok likely would not exist, or at least not be a notable problem.
Post WW2 was an economic and population boom time. The boomers resulted from that boom, and the programs for them helped them, and that boom continued.
Booms continue to grow until the fundamentals fall apart and the leverage can’t keep it going anymore - and then you get a bust.
The longer and unhinged the boom, usually the longer and unhinged the bust.
And here we are.
You are entitled to this belief, but I'd be remiss to not remind you that the Social Security Administration itself explicitly disagrees with your hypothesis, here:
"The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits."
Source: Same link as the one in my original post, https://www.ssa.gov/oact/trsum/
> Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.
Money is now, and will continue to do more so in the immediate future, flow out from the gov’t/taxes/money printer, and into retirees pockets through SS and other means. Up until recently, it had gone from major inflows to mostly neutral on that front.
For the reasons you’re mentioning.
So yeah, either we need to start producing more economic activity - or more likely - just print more money and hope it all works out.
We’re not in as bad a crisis as Japan, but it’s the same kind of problem.
Interestingly, with the US as the worlds reserve currency this is going to have a global effect.
When SS was formed in 1935, average life expectancy at birth was just 60, whereas the full retirement age was 65. In effect, this resulted in close to 150 people paying in for every 1 recipient.
These days, full retirement age is almost done being hiked to 67, while life expectancy at birth was up to 78 the last time I checked. This results in fewer than 3 people paying into the program for every 1 recipient.
If the full retirement age was simply indexed to (life expectancy at birth + 5), that would also solve the fiscal problems with Social Security, though it's a political impossibility.
I think people forget that the actual name of the "Social Security" program that people think of as "retirement" is OASI - Old Age Survivorship Insurance. I use Social Security in quotes because there are other components too, like DI - disability insurance, though that's negligible compared to OASI.
It was never meant be a retirement program, it was meant to be insurance in case you accidentally lived for a lot longer than you were expected to.
Extraordinary claim (less than 1% lived beyond 65)! Any citations?
Note that LEAB of 60 does not imply that fewer than 1% live beyond 65, nor does a payer:payee ratio above 100.
For most of human history, deaths followed a largely bimodal distribution - high infant mortality, lower morality in mid life, and then high mortality (approaching 100%) in old age. Put more simply: if you lived to, say, 3, you were much more likely than a newborn to make it to 70. A large enough portion didn't make it past infancy that it dragged down the entire average.
Much of the improvement in LEAB has been from improvements in infant mortality, not people living longer at the end of their lives (though that is increasingly a factor as medical care is improving).
Part of the discrepancy of the payer:payee ratio was due to more people having more kids, and a big part of that change is explained by our switch from a regular population distribution (many more young people than old people) to an inverted pyramid population distribution, like Japan's (a larger cohort of old people, increasingly smaller cohorts of younger people).
Fascinating you're compare the US to other developing countries.. and saying it is basically middle of the road as far as developing countries go.
Also Japan has a debt to GDP much, much greater than the US, and still seems to function fine as a country, so how do they do things differently?
Japan has essentially been doing this (the mechanics are a bit more complicated, but the effect is essentially the same), and they've been able to get away with it because inflation has been low for the last three decades due to external factors such as globalisation.
Now inflation is starting to rise even in Japan, so they may have some issues in the not too distant future.
Additionally some experts say that the inflation was bigger in Europe because the governments didn't do investments with new debt.
The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient.
When you realize they changed the definition only for better optics it's easier to question the underlying principles.
That probably isn't true, both because it isn't that obvious that the economists thought it was a good idea or that they were the ones who changed the definition. "Economists" don't have any power over anything and the consensus position seems to tend towards disagreement with government policy.
Inflation is one of those topics where there seems to be a dearth of actual economic evidence bought to the conversation. The policy justification in the public discourse tends towards just-so stories.
This is a good overview of the history of the term "inflation."
Ideally people would specify which inflation they're referring to, like monetary Inflation or price inflation. Short of that though, until we started moving to full fiat currencies inflation without any qualifier was inflation of the money supply. After the move to fiat they repurposed the braod term to mean price inflation, presumably because monetary inflation isn't meaningful when your system is based entirely on manipulating the money supply.
In fact, in those situations it’s necessary to increase the money supply to avoid deflation and other issues, as the existing folks with money/resources otherwise just have to sit on their hands and squeeze everyone else to get rich.
In an actual growth environment, Printing more money keeps everyone roughly the same level of poor/rich overall.
The issue is when population is decreasing or actual economic output is decreasing, but rather than withdrawing money to compensate, more money is printed to try to keep the graph going up and to the right.
IMO that has been an ever increasing trend since around the 90’s in the US.
Monetary inflation = money creation by definition. Whether that makes everyone poorer depends on other factors though, like how the money enters the money supply and what current market dynamics are.
Price inflation doesn't equal money creation though. Printing money can cause price inflation, but other things can as well. Printing money too slowly relative to the economy could actually not keep up, prices can fall even though the money supply increase. There may be a corner case or two, but I do pretty much agree though that price inflation makes everyone poorer.
Then we'd expect to see deflation when the supply chain crisis is resolved - which seems unlikely but I suppose it cannot yet be ruled out. I doubt anyone will be held accountable if that deflation doesn't materialise though.
It is an interesting question where CPI inflation is supposed to be coming from if not inflation in the money supply.
I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.
If tripling the amount of base money has no effect then logically destroying 70% of the base money would also have no effect, but I never see people advocating that
Its one thing when outside parties offer debt to a government, its effectively a show of faith in the government to pay its liabilitirs and still exist long enough to do so. Buy what does it even mean for a government to extend debt to itself?
You may be interested in reading about Modern Monetary Theory (MMT).
I'm not an economist, but had a mild interest in macroeconomy some years ago and found MMT eye opening.
What I was trying to ask there is what does it mean for debt to exist when there is no relative risk?
When a third party extends debt in good faith, it says something about their estimation of risk.
When a government extends debt to itself it literally means nothing, if one party fails they both do. More importantly, there's no recourse if the debtor defaults. The debt there exists purely as smoke and mirrors, it is created only so they can claim money wasn't made out of thin air.
I get where you are coming from. If I'm not mistaken, and according to MMT, a government buying its own debt induces future inflation and a decrease to interest rates.
All money nowadays is fiat (i.e. created out of thin air by a few actors), so it's not like any form of money creation and destruction means much more than changes to the inflation rate, interest rate and the derived swings to the economic cycle.
When you peak behind the curtain and see how an MMT system actually works, it's pretty clear that the whole thing is just for a game and, at best, a benign one.
As long as it isn't hurting anyone, I can see it being plenty useful given what we can do with it even if the system is just a game. As soon as the system starts harming people though, say because they can't access basic goods or live a happy life, simply because of how the game works then it skips right past being an entertaining game and into the realm of being a dangerous, arguably evil, weapon.
You get the market rate for your highly fungible regulated market instrument.
Investors are not emotional they can sell that shit and buy anything else from Silver to TSMC shares in a heartbeat. What makes it shit? Being a penny more expensive than the quant's model.
They can borrow from the FED real cheap using QE. But the only free lunch is the big bang! Printing money causes inflation especially in asset prices and causes bubbles.
It would be better to live in the U.S. with a 100x debt/gdp than live in Haiti, Niger, or South Sudan with a 0.1x debt/gdp.
Servicing the exisiting debt already cost the US a whole militaries worth of budget. And that is after decades of low interest rates. If interest rates go up even slightly, you have to refinance all the debt with a higher rate. And if the private market ever decide to lower the rating on US debt, or starts to expect higher inflation. The debt servicing alone could consume pretty much the whole discretionary budget.
And remember the are massive budget issue on town and state level in the US too. And they expect the federal government to fund all the massive infrastructure spending they need. Plus all the federal infrastructure.All that infrastructure from the 60-70 is falling apart.
The backlog is already huge and getting bigger, that from the discretionary budget.
So debt absolutly matters, it has mattered to every government for at least 5000 years.
A societ that is stable can be made unstable, and debt is usually involved. France just had massive demostrations because they wanted to increase retierment age. And that was a drop in the bucket compared to what France needs. That has lead to massive victory for outright nazi party in France, and the far left who want to ignore this problem has also won.
And this is in normal peacful times. What if another finacial crisis happen?
Lets see how stable everything is once taxes double or social services get cut massively. That how you get people elected with programs that are the opposite of a stable political envoirment.
And having your own currency isn't magic. All it allows you do, is use inflation to take money from your citizens without having to get something threw parliament.
The US has had a history of extremely fiscally conservative governments. After each major war they instantly reduced debt again. So Americans somehow think this isn't a problem, because in US history it has never been much of a problem. But for the last 40 the US political environment has changed and now the opposite is true, neither party is interested at all in reducing the debt.
The reality will catch up with the US as it has with 100s of other nations over the last couple 100 years of history.
> compared to other factors
The things you call 'other' aren't that 'other'. They are linked to money and money is linked to debt.
Getting educated people isn't free. You have to spend money, from pre-school all the way to university.
Companies need infrastructure. Infrastructure cost money. How much you can invest depends on debt.
And that political stability depends people getting basic needs met.
You act like debt was some separate problem that has little impact on anything else, but this historically just isn't the case.
> people are acting like its doomsday
No people are not acting like its 'doomsday', they are simply pointing out some basic realities about the topic and saying 'this is a problem we need to actually take seriously'.
However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration.
Immigration's positive impact on US fiscal policy is so large that not even right-wing think-tanks can refute it. [1] It raises the fraction of the population currently in the labor force. As a separate, compounded effect, the average immigrant contributes more to the social services pot than they draw out. The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. [2]
So when today's populists peddle nativism while posing as budget hawks, it really fits in nicely with the rest of their bill of goods.
[1] https://www.cato.org/blog/fiscal-impact-immigration-united-s...
[2] https://www.americanprogress.org/article/improving-lives-str...
Being pro immigration does not mean you’re pro illegal immigration.
> The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees.
If they don’t have social security numbers, they’re not paying payroll taxes.
We write the rules on what is and isn't legal. Writing the rules and then using them to say immigration is great unless it's illegal is very circular logic.
I do not see a logical flaw in this stance.
This distinction is mostly out the window with today's populists, see e.g. repealing jus soli and all the other racist dogwhistles.
> If they don’t have social security numbers, they’re not paying payroll taxes.
They're using SSNs, often false or not their own. Read about the Earnings Suspense File at the SSA in the second link I posted.
There are already some limitations on birthright citizenship, for example we do not grant it to children born to diplomats visiting the USA. It's not an unreasonable position to limit it to legal immigrants.
Foreign embassies are considered US soil for jurisdictional purposes. If an army forced their way in to an embassy so that their pregnant battalion could deliver their babies within the embassy, should they get citizenship? If it doesn't apply to the embassy, how about if they do the same thing to a small island controlled by the USA or even the southern USA border?
That's largely because the US is a signatory of the Vienna convention on diplomatic relations. Children of foreign diplomats born in the United States are not automatically granted citizenship because they are not considered subject to the jurisdiction of the United States.
Australia did the exact thing. Switch from Jus Soli to Jus Sanguinis. Some Jus Sanguinis countries have switched to some hybrid system that allows legal immigrants to get citizenship at birth.
There's no reason to punish US-born babies just because their parents committed a misdemeanor jumping the border fence. If they're born here and grow up here they're as American as anybody else, descendants of the Mayflower border-jumpers included.
To undertake the process of a constitutional amendment just to deny them that is one of the most racist policies being debated in this country since Reconstruction and the Jim Crow era.
> If an army forced their way in to an embassy so that their pregnant battalion
Most people prefer to live in the real world rather then in absurdist fantasy land.
But it doesn't matter anyway because heat death of the universe.
We mean that we're fine with the rate of immigration that as a country we've agreed that we're okay with (i.e. "legal immigration") and that it isn't okay to ignore these compromises and just let in anyone who shows up.
As of 2022, the undocumented population was still about 10% below its 2007 peak. [1] The population of the US grew by 11% over the same period, so as a fraction it's well below the recent maximum.
Some of the statistics at the border increased massively in recent years because a lot of immigrants are now turning themselves in as refugees. [2] This allows them to "ride the disfunction" in the backlogged immigration courts, granting them legal work authorization and deportation protection in the meantime. If we fixed the disfunction, they would just stop turning themselves in once again.
The level we've "agreed that we're okay with" is far from set. Every time we've tried to set it in recent years [3], restrictionists like you have spared no tactic to gum up the works. That's because you figured (correctly) that the level of legal immigration that we would compromise upon is higher than the level we currently have.
Restrictionists are the primary reason we have a vast underclass of semi-serfs.
[1] https://www.pewresearch.org/short-reads/2024/07/22/what-we-k...
[2] https://tradingeconomics.com/united-states/asylum-applicatio...
[3] https://en.wikipedia.org/wiki/Border_Security,_Economic_Oppo...
They are set. You appear to not like those levels, but they are well defined. Movements to change those levels are also fine, but again, legal immigration paths are well defined.
>restrictionists like you
We have a system by which we make these decisions as a society (i.e. the federal government). That system has not materially changed immigration recently. That isn't "gumming up the works" that's the system working as designed.
>Restrictionists are the primary reason we have a vast underclass of semi-serfs.
No. We have a underclass of semi-serfs because we have systematically and for decades chosen to turn a blind eye to (or actively encouraged) illegal immigration. We could enforce laws as they exist today and not have this human exploitation.
> We could enforce laws as they exist today
You can't have it both ways, either the system is broken or it isn't. You don't want to fix it because the overall level would increase. So you push for "enforcement," but that does nothing to address e.g. the asylum claims situation. The system cannot be fixed without updating the law.
The immigration system has been broken for more than a generation. There have been large majorities in favor of reforming it for almost as long. Doing nothing in this context is not how the system is supposed to work. It's actually amazing how a narrow-but-loud minority of visceral racists has managed to gum up the works for so long.
>you can't have it both ways
We have a system of government and that through that system we've defined legal immigration. That system is no longer being enforced, which is less of a system-problem and more of a meta-problem. I don't have any solutions to the meta-problem[1], but it is self-evident to me that even if we have immigration reform the system won't work if those who are sworn to uphold it neglect to do their part (that is, if there is a meta-problem, no within-system solutions will work).
[1] I hope it will work itself out in the polls but I guess we'll see
Funnily I'm making the same claim about you.
> the system won't work if those who are sworn to uphold it neglect to do their part
As is, the system is only serving the interests of the restrictionist minority. The situation is similar to where marijuana enforcement was a decade ago, and LGBTQ rights a decade before that. Many states have had to make-do with the situation and ended up building their own mini-immigration systems.
If this is the context in which someone is thinking "gee, but I'd really like to get millions of people deported and lock the rest out, how can I accomplish that?", well, it's just possible that perhaps they haven't come to terms with the reason why. They can call a spade a spade if and when they're ready.
What exactly is racist about being against jus soli?
Personally, I think birthright citizenship solves more problems than it causes but I also see the arguments against it.
Most countries in Africa, Europe, and Asia don't have it.
None of the Nordic countries have it - are they racist? I thought those were the countries everyone says we should try and be more like?
Pretty much everything?
If some new country like South Sudan was picking a rule from scratch, one could perhaps convincingly claim to be against jus soli for reasons other than racism. But to push for a constitutional amendment to deny citizenship to babies that are American in every way betrays the obvious reason for doing so. It just doesn't fool anyone.
Just sounds like you feel very strongly about this and want to say "everyone who disagrees with me is racist".
The majority of the world's population lives in countries that don't do birthright citizenship.
Jus Soli definitely gets abused. Cheap international flights didn't exist in 1866 when birthright citizenship became part of US law.
I could see merit in amending those laws, perhaps not abolishing it but maybe tightening it to only apply to children of legal residents or something like that. That's a system that many countries use, including progressive European states.
https://en.wikipedia.org/wiki/Literacy_test
The argument that a rule is color-blind on paper doesn't make systems that are incredibly racist any less so.
The jus soli repeal is a constitutional amendment that's colorblind on paper but that furthers a racist outcome in practice, which is why it's being promoted by bigots.
your enemies aren't all dumb. the smart ones aren't likely to talk to you based on your attitudes towards them.
I can't really know what anyone believes in their heart, but I doubt that the oligarchs who extol the free market (including the market for labor) really care about any of the demographic details of those they would employee as long as they produce as expected.
As for housing, it's screwed because of land-use policies that intentionally strangle supply to artificially inflate property values, such as suppressive zoning. If there was less demand the cartel would just restrict supply further.
Legal or not, this is the "homo economicus" view of humanity. Working-class Americans don't suddenly become CEOs, Middle managers, and white-collar professionals because we import more working class. If that was the case, the Rust Belt and Appalachia would be booming.
What actually happens is that the price of working-class labor decreases (due to more supply) and the higher classes make more money off the under-classes, leading to increased wealth inequality. Which is exactly what we've observed for the last 40-years.
They happen to enter at the least-educated, often unskilled level. This necessarily pushes everyone else up. A CFO that strives to be CEO but couldn't cut it yesterday does today, a director becomes CFO, and so on. This is not rocket science, especially for HN.
When you deliberately fail to appreciate direct logical consequences like this, your unbridled disdain for them is showing through. The same is true when you dismiss the countless economic studies that have proven that the overall benefits of immigration exceed the costs to a narrow segment of the labor market.
There are very few natives interested in cleaning bathrooms and picking vegetables. They haven't given up on their dream bathroom-cleaning jobs - quite the contrary. They have been able to pursue better jobs because there were immigrants willing to clean bathrooms. Those immigrants created demand for all other products. The table becomes bigger, and everyone scoots over. Again, not rocket science.
Something visceral gets activated about this issue, which is why it's ripe for populist con-men to ride it, logic and reason be damned.
e.g. In real life, 1 blue collar worker does not get promoted to a white collar job for every 1000 blue collar workers that enter the labor pool after them.
I understand this is inconveniently at odds with your visceral disdain for immigrants, but that's how the law of large numbers shakes out.
>they cancel out in the medium run
If this were true we'd see wages keeping pace with productivity. We'd also see wealth inequality remain constant. The US is famous for neither of those things being true. Your toy model of US economic activity is flawed with respect to real life.
These are macroeconomic variables that are affected by many factors. The production function argument I made is strictly microeconomic and independent of these.
Ignoring xenophobia based justifications against immigration, the only reason why the right wing has a major push against immigration is because unskilled illegal immigrant labor is better for businesses than unskilled legal immigrant labor.
Illegal immigrants can be paid below minimum wage and without proper tax or benefits contributions (forcing the immigrant to bare the company's tax cost if they want to actually be squared away with the IRS). Illegal immigrants also don't know their rights and/or are afraid of reporting issues to the DOL or OSHA out of fear of deportation (despite deportation protections for whistleblower immigrants). Illegal immigrants are also less likely to unionize because if they "make trouble" the company can just threaten to report them to ICE.
All in all illegal immigration is an exploitative relationship that overwhelmingly benefits the people and companies that most aggressively rally against it.
If you eliminate this exploitative arrangement and provide an easy safe path for immigrants to engage with the labor market, most of this lowering of effective wealth that occurs for workers goes away.
> this is a minor effect compared to a housing policy that assumes no immigration
Given that unskilled immigrant labor is predominantly seasonal migrant labor, this really isn't as much of an issue as you'd assume. And the solution to this is again opening up the legal immigration path and adjusting policy decisions to reflect that.
Overwhelmingly the costs associated with immigration are costs associated with illegal immigration and they are predominantly self-inflicted in an attempt to optimize profits for the capital owning class.
I agree that illegal immigration is highly exploitative. I disagree that it most benefits the people who are most vocally against it. Since you just assert this without presenting your logic, I reject it on similar grounds.
You also conflate seasonal labor with housing. Seasonal laborers need a place to live all year around, not just when/where they're employed.
The rest is just word salad solutions "adjust policy decisions to reflect that..." and "optimizing for the capital owning class".
if I'm generous with your proposal; wouldn't you still find immigrants applying for citizenship and eventually pulling from SS? most immigrants are younger and we should both be able to agree, they'd likely want to stay if they could.
I feel like your biases are coming through with a lot of this, the answer to our debt problems will not factor heavily with immigration.
If I owe you 100 grand and I can't pay, I am in trouble.
If I owe you 100 trillion and I can't pay, you are in trouble.
Basically after WW2, as soon as the war was over debt started dropping. Before the great societ stuff, the US didnt have so many future liabilities. Debt was dropping during Korean War.
From the 2024 article:
"In our best scenario analysis, stabilising the fiscal outlook will take years to accomplish, but also require significant action already in the short run, operating on both spending and taxation. A consolidation over a long horizon should not be confused with procrastination. Waiting is costly: the size of the required correction is already sizeable. With debt growing at a sustained rate, delaying action can only make the required correction larger. Even more, waiting is risky."
I was saying exactly this was true in the 1970's and unfortunately that's when the significant action failed to be taken. It really was needed in the short run right then but for lenders there was too much to be made by completing the shift away from the stable debt/asset ratio << 1 which had built the country, rapidly over to a variable payment/cash-flow ratio instead. This is not a perfect simulation since real assets are important, but the main thing is it allows the lenders to avoid shrinking themselves, or even grow a bit during times of no actual growth in the "economy" at large. And the payment/cash-flow ratio can be focused on and "responsibly" maintained below 1 since that is a widely-agreed "bad thing" which leads to certain collapse for a financier.
But acceptance of this allowed the newly deprecated debt/asset ratio to rise exponentially from its near-zero starting point since additional debts (often at less-attractive terms for the payers) could be piled on more discreetly, and assets themselves are virtually out of the equation too and more ripe for the taking if opportunities presented themself. There was so much more money to be made by making deeper debtors out of those who were established, and adding new debtors to the rolls whose underlying assets were too low to be reasonable under normal times.
Assets of the most well-heeled can be better protected, and assets of the masses tapped into in different ways and neither will effect the overall equations or outlook when the equations are based on "money supply" and "velocity" rather than (remaining) net wealth or real assets. It's a slippery slope but if assets are being tapped into they dwindle, regardless of how the payment/cash-flow figure may take prominence and provide untold opportunities for those adjacent to the cash pipeline. Debt/asset can then smoothly climb much closer to 1 without gaining enough attention, and even smoothly move above 1 with no further apparent effect !
But let that "hidden" debt/asset ratio remain above 1 long enough, or even above 0.5 beyond "2 whole periods of time" and assets will not stop declining toward zero until done. Automatically, without additional debt being incurred. And the ratio goes through the roof even faster. Unless something major is done about it. Meanwhile the sky remains blue and nothing can be seen on the horizon that looks any more threatening than it has been the last few decades.
The action needed now is the cost of waiting this long.
France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2]
Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc.
[0] - https://cepr.org/about
[1] - https://www.politico.eu/article/macron-heads-to-washington-o...
[2] - https://www.institutmontaigne.org/en/expressions/real-reason...
EU scary hours will begin in something like 10-15 years when Poland will be asked to become a net contributor (after they converge and some W. Europe country will inevitable come up with the idea of plugging fiscal deficits by cutting EU contributions).
Doesn't mean Americans should undermine our Industrial Policy because French and German players are nowhere near as competitive.
At least Eastern European allies help cover and support American defense spending in Europe, while Western European players like France and Germany are opposed to Atlanticism unless SHTF
There are changes in international settlement that bypass the dollar. China and Russia and others have been advancing ways around needing to use the U.S. which is already having consequences as some of this would have found its way to funding the rising U.S. deficit.
Most likely through buying Government debt and there is a chance we will know when the debt party is over if there is ever a Treasury issuance that cant find a buyer.
Given that part of the problem is the system where there is always a buyer of last resort and so much of the debt is money we owe ourselves. Which reduces but does not eliminate the impact of the move away from the dollar.
It is clearly unsustainable and certain measures like the reverse repo market show a sort of short term liquidity and it is interesting to compare it to future issuance of debt.
The resulting effect then would have to be increased inflation until spending reaches and equilibrium again. Though with all of the potential threats around the world, anything can happen.
It just isn't sustainable and there seems to be a collective delusion that it is.
Even if the US manages to not get involved in yet another expensive overseas war, it's still going to have significant budget issues. Decades of prosperity have been squandered with zero long-term vision, let's hope the backlash from it in the near future won't be too bad.
As for taxes, the past few GOP admins lowed taxes for the ultra wealthy and corporations. If they had stayed at the same level, the debt would be much lower. Plus Bush's invasion of Iraq, for no reason, added quite a bit also.
It’s not about imperialism or hegemony, which are fashionable reasons used by the poor. It’s literally because there are no alternatives.
The US also is in the unique position of stabilizing the entire world financial system, something it does on an occasional basis. I’m not sure you understand what the price of financial chaos is, but it generally involves massive amounts of human suffering.
As an aside, imperialism is generally better than anarchy. Ask Libyans and Somalians how anarchy is working out for them.